RHB Research sees neutral impact on market from next GE

Neither side has yet put through meaningful reforms to bring through the next generation of leaders that can resonate with the younger voters, let alone show the electorate ample reasons why they should shed the yoke of political fatigue and get more engaged with the political process.

RHB Research

KUALA LUMPUR: Regardless of which political coalition succeeds in securing the seat of power in Putrajaya in the next general election (GE), the impact on the market will likely be neutral, RHB Research said.

In a research note yesterday, it said the challenges remain and neither side has yet to prove that its leadership offerings and ideas are superior to the other.

“Neither side has yet put through meaningful reforms to bring through the next generation of leaders that can resonate with the younger voters, let alone show the electorate ample reasons why they should shed the yoke of political fatigue and get more engaged with the political process.

“The continuity of key policies and ensuring that the rule of law applies are the market’s basic expectations, regardless of the victor in GE15,” it said.

With the current sitting of Parliament ending in mid-2023, and the recent landslide victories for Barisan Nasional (BN) in Melaka and Johor giving rise to calls from BN strategists for the Prime Minister to dissolve Parliament and kick off GE15, RHB research said it seems a general election would be sooner rather than later.

“A negative outcome (from GE) would be a result that does not allow the winning coalition to emerge with a reasonably comfortable parliamentary majority. A “hung parliament” scenario would lead to more unsavoury horse-trading, partyhopping and side deals that are not in the country’s democratic interests,” it said.

Overall, the research firm expects the economic recovery to ensue but acknowledges gathering headwinds.

“Market valuations are not compelling, given the paucity of earnings growth in 2022. Accordingly, the potential for volatility suggests that domestic investors will not look too far ahead while maintaining a nimble stance.

“The year 2022 will be a traders’ market that will require astute bottom-up stock-picking. Investors should remain focused on value and cyclical names that can leverage on the recovery, and look for more attractive entry points to build positions for the longer term,” it said.

However, RHB Research advises investors to maintain core holdings in defensive, highyield stocks and companies with a strong environmental, social and governance (ESG) profile.

“Our end-2022 FBM KLCI target is predicated on the assumption that the broader economy will continue to re-open, helped by a relatively stable environment for global growth.

“We lift our end-2022 FBM KLCI target to 1,670 points, from 1,630 points, after ascribing an unchanged 16 times price-toearnings (P/E) to 2023 forecast earnings, a slight premium to the market’s long-term mean P/E of 15.7 times.

“The higher year-end target reflects a net 2.9 per cent increase in the financial year 2023 earnings per share compared to the estimate at the date of the preceding quarterly report,” it said.